Brexit and the Art Market (ctd.)

April 2 2017

Image of Brexit and the Art Market (ctd.)

A picture: of despair

There's a good piece by Scott Reyburn in The New York Times about the view of the UK art market on Brexit. It's fair to say I think that most people in the market are probably in favour of Brexit ('Droit de Suite' being partly to blame I think). Here's the view of Anthony Browne, chairman of the British Art Market Federation:

“This is an opportunity we have to grasp to improve our global competitiveness,” said Anthony Browne, chairman of the British Art Market Federation, an organization that lobbies the government on behalf of auction houses and dealers. “We are in a very strong global position already,” Mr. Browne said, adding that the world’s second-largest national art market last year was in Britain.

According to the estimates of the Art Basel-UBS art market report, published last week, Britain’s dealers and auction houses captured 21 percent of the $56.6 billion of global art sales in 2016. Those in the United States led with 40 percent, and those in China came third with 20 percent, according to the report.

Mr. Browne sees Brexit as an opportunity for the British art trade to free itself from the encumbrances of Europe-imposed tariffs and regulations, such as the value-added tax (5 percent in Britain) on artworks imported from outside the bloc. He said his organization would lobby for streamlining cross-border tax arrangements with Europe and for amending or abolishing a regulation that grants artists a royalty payment each time their work is resold.

I applaud Anthony's ambitions here, and wish him well. But I find it difficult to see how, from outside the EU, we can negotiate an arrangement that lets British dealers sell art to Germans (import Vat on art, 19%) at the same tax rates as to the French (Vat, 5.5%). At the moment we can sell art across the EU with zero additional Vat.

And here's my friend, the London-based dealer Offer Waterman:

“A cheaper pound helps us to sell more art, and all sales to the E.U. will become export, so VAT will be eliminated,” said Offer Waterman, a London dealer specializing in 20th-century British art. At present, “secondary market” dealers in Britain must pay a domestic 20 percent tax on their profit margin on sales to clients from the European Union.

“But this isn’t going to be an easy divorce,” Mr. Waterman added. “Ultimately it’s about the deals we get from the E.U.”

Offer primarily sells British art, sourced I presume in the UK, so a cheap pound is good for him. He is also right about margin Vat (20% on the profit art dealers make on a painting) being abolished if all art sales to the EU become eligible to be 'export sales', as is the case with sales to the US. In the same way, US tourists to the UK can get back the Vat they have paid when they get to Heathrow. But any saving of Vat in this way is usually, in practice, offered at least in part to buyers (at least, canny ones) as part of their negotiation. And in many cases (e.g. Germany) the saving on margin Vat sill won't cover the price hike dictated by the new tax for selling into the EU.

Anyway, theses are merely the objections of a defeated remainer.

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